Finished product inventories of galvanising enterprises rose slightly in August before declining. What are the reasons? [SMM Analysis]

Finished product inventories of galvanising enterprises rose slightly in August before declining. SMM provides the following reasons:

Ferrous metals are one of the main raw materials for galvanising enterprises. Since the beginning of 2024, ferrous metals prices have been continuously declining and fluctuating at low levels. By August, ferrous metals prices had dropped to their lowest point in nearly a year. Galvanising pipe traders changed their trading methods, opting not to stockpile finished products in advance but to restock as needed. The excessively low ferrous metals prices caused panic, and downstream buyers waited for prices to rebound, leading to a significant decrease in the sales volume of galvanising pipe enterprises. This resulted in a noticeable increase in finished product inventories in mid-August. As sales volumes gradually recovered, most downstream enterprises remained pessimistic about the price trends of ferrous metals. Considering costs, they did not excessively accumulate inventories. Consequently, the inventories of galvanising pipe enterprises declined subsequently.

Regarding the operating rates of galvanising producers, the operating rates in 2024 were generally slightly lower than the same period in previous years, reaching a relatively low point in August. Many enterprises, considering cost factors, halted or reduced production when their finished product inventories exceeded their set capacity limits. Many enterprises based their operating rates on sales volumes, increasing production when sales were high and reducing it when sales were low, avoiding excessive production. Additionally, some enterprises faced cash flow issues and scheduled production based on sales, reducing stockpiling. Recently, there have been positive news in the real estate sector, but these have not yet materialized. If they do, they may boost ferrous metals prices, leading to an increase in finished product inventories and operating rates of galvanising producers. However, actual demand conditions need to be closely monitored.